Detroit Plan Would Put City Under Board to End Deficits

March 30 (Bloomberg) -- Detroit’s City Council took its
first look yesterday at Michigan Governor Rick Snyder’s revised
plan to stave off bankruptcy by putting the city under a nine-member panel charged with ending deficits within five years.

Among the powers the 43-page proposal conveys to the board,
to be named by Mayor Dave Bing, Snyder and the council, is the
authority to force city unions to accept 12 provisions in new
contracts, including putting new hires on 401(k)-like plans.

Several council members faulted the plan, which was drafted
with Bing’s input, although he hasn’t fully endorsed it.
Councilwoman JoAnn Watson said it wouldn’t provide enough state
aid and that it attacks unions’ collective bargaining power.

“It’s not a partnership, it’s a takeover,” Councilwoman
Brenda Jones said yesterday at a meeting to review the proposal.
Bing and the council rejected an earlier version from Snyder.

Among the provisions that unions would be forced to accept
under the plan from Snyder, a Republican elected in 2010, are
the elimination of so-called bumping rights, merit-based
promotions, changes in work rules to lower costs and letting the
city hire contractors to provide more services. The changes
would take effect after current contracts end in June.

Unions representing about 6,000 of the city’s 11,000
employees have ratified wage and benefit concessions negotiated
with Bing. The council hasn’t approved the revised contracts.

$270 Million Deficit

Michigan’s biggest city and the home of General Motors Co.,
the world’s largest automaker, may have a $270 million deficit
by the end of June, according to a council report in February.
State Treasurer Andy Dillon said Detroit’s cash will run out in
May. Detroit and Snyder have until April 5 to agree to a
recovery proposal, or the governor can name an emergency manager
with sweeping powers over municipal finances and operations.

The plan lets Bing and the council keep their powers under
the city charter. If the agreement or the board’s financial
instructions aren’t followed, Sndyer could appoint an emergency
manager who would be permitted to cut costs, fire workers,
nullify contracts and assume the power of the mayor and council.

Among the criticisms voiced by four of the nine council
members was that the latest proposal usurps their power as
elected officials. A majority must approve the plan before it
can take effect. There were no votes taken on it yesterday.

State Senator Bert Johnson, a Highland Park Democrat, urged
the council to reject the proposal, saying that payless paydays
for city workers would force the state to be more willing to
give the city money that it’s owed.

No Bailout

Snyder has said the state won’t bail out the city with
cash, while letting it borrow $137 million to avoid running out
of money to cover its payroll by May. Bing and council members
have complained that the state reneged on more than $200 million
in revenue sharing funds.

Bing, who remains hospitalized to recover from abdominal
surgery performed March 24, praised the plan’s goals in a
statement sent from his office. He said it includes state aid,
such as helping the city to collect unpaid income taxes, and
preserves his and the council’s authority to solve Detroit’s
fiscal crisis over time.